good morning, everybody. welcome to "squawk box" here on cnbc. happy friday. i'm becky quick along with joe kernen and steve liesman sitting in for andrew ross sorkin. we'll start with the fiscal cliff as optimism dwindles. lawmakers admit they have made no real progress. republicans are rejecting president obama's proposal which includes a $1.6 trillion tax increase, a $50 billion economic stimulus package and new power to increase the debt ceiling without congressional approval. the offer featured higher tax rates for households making over $250,000 a year. a one year postponement of the sequester and about $400 billion in savings over ten years for medicare and other entitlement programs. >> despite the claims that the president supports a --

>> thousand is the time fnow is republicans to move past the happy talk about revenues, ill defined, of course, and put specifics on the table. the president has made his proposal. we need a proposal from them. >> today president obama is taking his pitch on the road. he will be visiting the philadelphia suburbs employing campaign style tactics in hopes of mobilizing the public to his side. he'll be speaking at a manufacturing facility arguing that businesses it depend on middle class consumers over the holiday season. despite all this, you see the futures today indicating higher. dow up by about 35. does that surprise you guys? >> no, i don't know. i think people still think that

eventually they do what they have to do and that is talk to one another. we don't need to be -- i don't like the campaigning. i don't like going out and selling it. you keep telling your constituents to write their congress people or whatever. f trying to put pressure on. 250 and above raises 800. you need the cap and all the deductions to go away and you'd need going up on marginal -- >> it included the extension of the payroll tax cut and the extended unemployment benefits, too. >> i don't like the way obama started here at all. i mean, there were two ways to start the negotiations. one was did you ever see into guys like haggle over something and one guy says a dollar and the other guy says 1,000. and that's where they seem to have started. he could have started at 500 and then the republicans could have

said maybe 100. but he started this thing, he put his foot forward like you know what, i'm willing to play this to the bitter end. this wasn't a thing that said let's get it done quickly. he sent geithner over. he used geithner's political capital which i think was a mistake for geithner. >> he's leaving. >> but it's like using -- >> going back to goldman. >> where he started. >> where he cut his teeth. >> like using a pitcher because you don't care about his arm at the end of the season. so you threw him out there and you send him over with -- and you also let the republicans characterize the plan. which from a pr standpoint i don't think was that smart. so i think they blew that one. but ultimately it strikes knee obama did not suggest, you know whark what, i want to get it done quickly. >> people supposedly knew or that act like they know what the pinl deal will look like is like they gotting withed down at 800

last year. so the president is starting at 1.6. so they'll end up between a trillion and 1.2. anything close a trillion would be seen as boehner prevailing a little bit because he only had to go up 200 billion and anything closer to 1.2 or -- would be a win -- >> i think the big question is what happens to entitlements, too. what do you put on the table for that. >> the different websites have different -- grudge is ha-ha with a picture of mcconnell sitting there. he says he didn't do it in partisan on purpose, but he heard the deal and started laughing out loud. not to insult geithner, but -- >> that were his marching orders. >> mcconnell supposedly laughed out loud not on purpose to embarrass geithner, but just because they're so far apart. >> what would be the thing that the republicans would have

reacted better to when it came to the $400 billion? if they said -- i don't think obama is going to say -- >> what is possible. what were they talking about last year? weren't they talking about a trillion? >> a trillion last year. >> obviously you have to put the changes that happened well down the road because the economy's not ready to handle a lot of these changes in terms of cuts and things like that. but the idea that it feels like they're not going to do anything. you could wand ind up with the situation, let it all ride. we won't deal with any of it right now. >> republicans have had a good pint that tax increases are immediate and spending cuts are put off. >> when is a good time? they're talking about another four or five years of we're not going to be ready to have any type of austerity because it's

still this huge debt overhang. what color is that tie? >> i don't know. red, i think. >> is it a red rutgers tie? >> not intentional. i completely forgot about the game. not having paid attention to the most important sports event of the year. >> they lost. but they played well. >> they showed up. i didn't see it, but i was happy they showed up. i have my rise above button back on because i thought i was going to have a rutgers button so which would not have allowed me to -- but now i had room for this. you got no sleep. >> yeah. >> were you tipping them on back or not? >> a couple of drinks. >> and then when you got home, you had a couple more probably. >> i did not. i went straight to bed. >> they've done this before. we're all familiar with that with our teams that sometimes get right there and then they seem to -- >> they were going to go to a bcs bowl game if they won.

>> now they're going to a bowl game, but not a real one. which they were playing for either the orange or sugar. >> you've heard of both, right? >> this is why state schools are great. i don't have to worry about this stuff. >> it was a heart break, but they play well. >> they showed up. they should have beat pittsburgh and then we wouldn't be having this problem. >> they're still 9-3. >> that's a good year. >> a crappy schedule, but you can now -- i had to -- my wife went to sc, so during sc/notre dame, i had to sort of root for sc. so once they're gone, you can be a notre dame -- >> let's do that the rest of the rear. >> i just don't have a dog in the college football -- >> the sec has had way too much success. >> alabama and auburn and all those. >> florida. >> the pac-10 or the big ten?

i don't know what i'm talking about. who is the competitor to the sec? >> there is no -- there hasn't been a competitor. >> what's the one that rut gger just join some had. >> the big ten. >> on so trying toitor competitor. >> and there are good teams out west. pac-10. oregon is good and ucla and usc. >> by the way, i have to apologize, i don't know if june is watching. she sat by us at the game. she gave me gloves, i'm really sorry, i walked out with them. i gave them to ray who said that he sees you all the time. >> ray rice? >> no, a different ray. i hope that he actually does see her because i gave him the gloves. but tweet me and i'll pay for the gloves. sorry. i feel so bad, i pronled i'd give the gloves back and i walked out with them. >> i guess we should move on. >> probably. >> earlier this week we told you about james gorman's memo to

employees, encouraged them to make calls and letters to washington demanding a balanced compromise on the fiscal cliff. today's politico's morning money reports the bank's employees have sent more than 15,000 letters to congress in the past into days. all 100 senators received letters from morgan employees and 398 of 436 house members received letters. >> andrew is not out because of rutgers. >> i think he's at home crying for me. no. he's on vacation. >> the latest fund flow data shows investors did in fact pour money into stock etfs amid the optimism that we had for a while about the fiscal cliff. stock etfs raked in about 7.7 billion in new investor cash in the weeks that ended wednesday. that's the most money since the week that the fed announced it's extended stimulus plan. meantime bond mutual funds and

etfs combined attracted 1.8 billion in cash and that's the most in three weeks and more than double the previous week's in-flows. two economic reports of note today at 8:30 eastern, personal income and spending polled economists are looking for income to rise by 0.2%. while spending increases by 0.8%. also on the calendar today, but after the show, so never mind -- no. november chicago pmi will also be out at 9:45. in news out of europe, the german parliament has overwhelmingly approved the deal to trim greece's debt load. the agreement reached earlier this week passed by a 473 to 100 margin. seen as a test of angela merkel's authority over her central right coalition. and we'll have more from kelly evans in london in just a couple minutes. >> we've mentioned the futures are indicated higher despite what looks like no progress between the two sides on the

fiscal cliff. right now the dow futures up by about 41 point. also if take you a look in europe, modestly looking higher there. france up by about 7 1/2 points. ftse up by about 11. dax by 25. in asia overnight, you did see stocks rise. china shares rebounding from near four year lows to break a four day losing strooet streak. hang seng up by 107. if you take a look at oil prices, you will see that right now wti crude barely bunching up about five cents to 88.12. the ten year note at this point at least is yielding 1.618%. still trading in that very tight range. the dollar this morning has been weaker against the euro and the pound, it's up against the yen. the euro at 1.30. >> how did that happen? >> yesterday was 1.29 and change.

>> don't say it. >> you have to catch yourself. >> i'm on the way. >> he finds the -- >> it's the opposite of what every central banker and former central banker who i sat with that the conference in august, the euro's got to weaken, the only way out for europe. and it's done the opposite. not just the exact opposite, but the actual opposite. >> there have been more articles about our former boss and friend. just two days ago, he was supposed to go and they went crazy with the articles. and now he is going and it's a the same thing. they're going crazy again. and i'm really happy for him and i'm looking at this and you know what, what i like is when they talk about how great did he with managing cable properties. because we're one of the cable properties that he managed and that's why he's seen to be so successful. because we can share in that success to some extent.

we like competition. >> i like jeff, too. >> and we love jeff. so congrats. they have the scuttlebutt. i wonder what will happen with him and this kent guy. that's all going to be -- it will get worked out. are we allowed to mention things like that? i took a chance. can't ignore it. it's everywhere, right? steve, you're just not saying a word. you're worried about something. you're such a wuss. >> i find myself to be totally unaware before i know jeff. i know he's going cnn. i don't know who this contents oig guy is. >> he's the guy that is between buchus and -- >> okay. i still consider myself to be a print reporter and you can see by looking at me. >> you mean you 23450edneed a w decide how you feel. >> at least a few hours. it is time right now however for the global markets report. kelly evans is standing by in london. another former ink stained.

what have you been thinking about over the long term here? >> i've got a special one coming up for you guys. some comments from the french industry minister which i'll get to in a second. first i want to give you a sense of how markets are reacting to comments from mario draghi talking about the need for rebalancing. says the ecb can't solve the world's problems. stoxx 600 up about a tenth of a percent. so in the last trading session of the month, a pretty decent attitude. you mention what had's happening with the euro. above 1.30 briefly. now slightly below it. but i want to draw your attention to one stock in particular this morning. sharesing down about 0.4%. the world's biggest steel maker. been trying to close two furnaces in northeast france. france as we know has exerted a lot of political pressure on companies because it's worried about the worsening unemployment situation in the country. especially because this area is one where president hollande really focused when he was

campaigning on maintaining the country's manufacturing base. the industry minister came out earlier this week and said that it was no longer welcome in france after it had broken a series of promises over the years with regard to these plants. so cnbche have i minuindustry minister and ask him about his comments. and he doubled down. here's what he had to say. >> translator: barack obama's nationalized. the germans are nationalize. and i will countries are nationalizing. i've also noticed the british nationalized six banks. it's true. i don't see what the problem is. >> what about the signals you're sending out to investors? >> caller: it's a very good sign to send out. nationalizing is a very modern step to take especially when you not only nationalize losses, but

profits, as well. when you make profit public partnerships. >> now, he's known as one of the more left wing officials in france. but i thought the comments were extraordinary. i certainly want to see what your reaction is to them and i want to remind people, too, that when we're talking about what happens with europe going forward, it's not just about the macro data, it's as much about the politics and it seems that the politics are getting more shall we say interesting. back over to you. >> kelly, i have to tell you that you need to get on board with what -- you'll be a member of the squawk team as you are going forward is just not -- joe, do you want to -- >> rarely do we travel backwards. so it's kind of implied that you're talking about the future most of the time. >> joe has a lot of pet peeves. >> that's one of them. >> they talk about a company doing going forward. we know how they did going backwards. >> kelly, i had to learn this one, too. the going forward thing. i had to physically take it out.

>> by saying one of the real left -- that's saying something if you're saying one of the real left wing frenchies. average is pretty left over there, isn't it? what is a real lefty do over in france? i guess that's the 75% like income tax rate. >> i just have to say it's extra ordinary, we are seeing -- i would have assumed when i first saw the story developing this week that france would really try and emphasize it was just a case of this one particular company, this history of deals maybe some bad blood there between them and the government. but what we've seen is the industry minister coming out and again mentioning as you say that he's one of the more left wing officials in france, we get that, but still for him to sort of double down on those comments and say, no, actually, i look around, i see other countries nationalizing these companies. why shouldn't we, too. >> but i think they really do see certain of their companies as more a property of france than of shareholders.

their yogurt company. >> but mattel bought france's arsenal back in 2006. so while it's a traditionally france company, it's very important example of cross border m&a. and this is a company again, an india company owned wouldby guy are french in their behaviors. stefane has been all over this kind of explaining the various ang angles. so as we're talking about other wealthy french leaving the country amid the tax hikes that you've been talking about, it's also a lot of the entrepreneurs here who are to some glee getting in the crosshairs of the government. >> i have to give you some advice. the key for you is to understand what they're says, be able to report what they're saying, but resist the temptation to go native so that when you come back here, you will understand this country again. that's really the problem. it's when you start to -- >> she hachsn't been over there that long. that happened to you.

>> was i referencing tea? >> you're doing a great job. just be careful. >> he spent a lot of time in lo moscow. >> i appreciate the concern. >> he is looking back at what did he, not what you're doing. but you're right, thank you for bringing this stuff up. and politics -- >> i think next time i'll just sting to the euro and euro stoxx 600. >> no, this is the same stuff happening here with washington. and it matters. thank you for make sure we know what's happening. >> do you go over to paris yet? >> no r, it's expensive. >> hitchhike. coming up, you conditioned afford to wait until the opening bell rings.

#. if we go over the fiscal cliff, global business travel association estimates that u.s. biz travel spending will take a $20 billion hit in the short term. but how about the long term outlook? find out next. [ male announcer ] you are a business pro. governor of getting it done. you know how to dance... with a deadline. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. this is awesome. [ male announcer ] yes, it is, business pro. yes, it is. go national. go like a pro.

what are the long term effects for business travel if the economy falls off the fiscal cliff? the gbta predicts the reduced deficits and lower interest rates will lead to growth in the economy and an increase in business travel spending. welcome back. now to the weather channel. reynolds wolf is standing by. what is happening around the country today? >> the story is all west. everything is taking place out west. rain, some strong winds, even some snow. some places snow getting up to around 2, 3 feet, but that is high elevation. but for the eastern seaboard, pretty quiet p. temperatures very mild this time of year. when you get into the center of the u.s., still fairly mild conditions. a bit cooler as you might imagine in spots up like towards the twin cities and even over towards chicago. but then out west, that's where the trouble really brews. it's that time of year that there's norm lay big area of high pressure that sets up off

the west coast. that's gone and that allows all the pacific moisture to come through. high snow will be an issue. rain in seattle. so how is it going to affect your travel? a little bit of a trend continuing here. again, all your issues out towards the west. san francisco, major delays expected. same deal over in oakland. a lot of your shawl airports will have backups there. seattle moderate delays. but so far in los angeles and in chicago, even detroit, only minor delays. overall not a bad weekend with the exception again out to the west coast. back to you. >> glad we're on the east coast. >> all right, wolf. no, reynoldss. either way -- >> i answer to anything. >> but -- >> he wants you to flip it. he likes wolf reynolds. >> he claim that's his real name. >> and reynolds is his mother's maiden name. >> so he says. >> there you go. >> thank you reynolds. in squawk sports news, the

atlanta falcons? this is not about the starlet knights? >> 12-1. >> they got it going. beating the saints 23-13 last night. drew brees had his nfl record streak of throwing a touchdown pass in 54 games that came to an end. he was intercepted five times. atlanta can clinch the nfc south title if tampa bay loses at denver on sunday. and a heart breaker for rutgers. falling to louisville 20-17. failing in it bid to win the big east. crazy still still happening. >> honestly, i don't know what this means. >> it means louisville gets to go to a bcs bowl. >> beyond that i don't know what it means for rutgers. >> and you don't go to the big ten for a couple years still.

you have to get some talent on the team between now and when you go. >> you had a good year. don't be down. >> we were already planning to go along with them. >> you were counting your chickens. >> we were. but they did play beautifully and they did a great job and it was really fun to be there last night. when we come back, the picture from the futures pits in chicago. plus the advertising indicator joining us on set to talk about spending and the global economy. and his election with joe. get who won.

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. good morning and welcome back to "squawk box." i'm joe kernen along with becky quick and steve liesman sitting in for andrew ross sorkin who couldn't even get out of bed after what happened to rutgers. >> he's on vacation. >> he's on an unbelievable 0.01%er vacation. i'm not going into it. >> is he going to bring back dangerous --

>> no, no this time. i just told him treat the servants nicely. i did. the ones that he's going to have. i think he's got a staff of 16 or something. >> third world place? >> i'll tell you during the break. >> let's go from the fascinating discussion about andrew ross sorkin and his vacation to markets. ira harris joins us from the cme. ira, here's what i want to know. the market seems like it's up this morning, but it's been trading on the headlines coming out of washington. does this mean the market likes what it heard yesterday or did it hear what i heard which was not a lot of progress? >> i think it heard not a lot of progress which is what we saw late. we're in this thing where we have the algorithmic models that read headlines. so last night the market took a quick dive when i was sitting in front of the screen and a headline came across mitch mcconnell breaks out in laughter. and so, boom, we got -- and then

it came right back. but i think the market is a little more getting comfortable with it and again, i think we're much more important to watch what's going to go on with the global central banks that the point in time. because we're caught. this is a fiscal cliff now. this is a prisoner's dilemma and everybody is staring each other down and we're all sitting at a poker table wondering who has the best cards. >> so what do you think will happen with global central banks? we know the fed will take operation twist and turn it into qe-3-b, i guess. i don't know what you want to call it. but instead of swapping short term for long term debt, it's going to buy long term debt outright. >> printing money, right. >> conventional quantitative easing, printing money, whatever you want to call it. and what are we expecting out of europe? what is this with the 1.30 on the euro, a currency everybody says ought to weaken? >> but there are still people

who are when the risk on models take over, they buy the euro. that won't last forever as we're starting to see what's going on in france. but spain is certainly the next issue. they had to push greece out of the way and it's interesting the way they resolved greece was exactly what the germans have leaked to reuters about three weeks ago. almost verbatim. >> sometime in wrun when thjune forget how bad i was co-anchoring, they'll let me back in the seat. when we talk in june, where will we be? >> i would have to say if the dollar issues get resolved, probably 1.15 to 1.18. >> that's what everybody says it should be. and everybody says 1.15, 1.20, and it keeps going up. thanks, ira. >> our next guest is here to claim winnings against a bet

with joe. w sir martin back in may. listen in. >> whoever wins, because we have a bet going on this. >> where will we go to dinner? >> if you win, it's your choice. >> with us onset once again is the advertising tycoon, martin sorro. >> it was early. and that was may. but we had already made the bet. it's because, you know, you europeans -- yeah, yeah. >> you were very rude to a foreigner. you said i wasn't entitled to comment on the election. >> i didn't say you weren't entitled. the other thing is that as an ad man, i should have known that

you're aware of a skilled advertising executive's ability to lead people around with misleading advertising. you knew that the more effective advertising would allow the masses -- >> on a very serious point, the people that obama and his advisers, axelrod, plouffe, et cetera, they employed for them were better than the people -- >> universal agreement on that. >> that's what i'm talking about. >> this has to be one of the most epic advertising failures of all time. when i'm talking about the money spent, how do you react to that? almost has to undermine your business. >> super pacs aren't republican. there was hormone spent on the left than on the right. >> used to be a guest could get a word in edge wise.

>> more money spent from the left on super pacs. >> it goes back to the supreme court decision and whether it's right. we wall could you late something like $7 billion to $8 billion was spent on the election in the two years. so we don't have that problem in europe, joe, as you know because there's a limitation on it. >> every election in europe, there's like eight parties running and then you have to have some bizarre coalition that lasts for six months and then another election. >> and we're suffering. >> we don't want to be like you. >> it's a misreading of the mood of the american population during an election year. that's the problem the republican party had. they think of the u.s. being center right. and much to joe's chagrin, the u.s. is center right in an election year. fiscal cliff. >> it's fiscally center. i don't know if it's center

right. >> martin, what's happening around the globe in terms of you're talking about -- >> i wish i knew because it's very mucky. it's tough. and i think clients have actually gone from looking -- >> i'm looking up the same thing. >> clients have gone from looking at annual for quarterly. i think we saw in september really rapid adjustments by clipts clients. july and august were okay. september was tough. october was better than we thought. but it's very uncertain. they're finding it very difficult to predict consumer behavior in the short term. >> and as a result they're pulling back? >> as a result they're being very cautious. so while you have the fiddling this washington and we saw that in the summer of 2011, exactly the same situation -- >> do you blame this on the fiscal cliff in part? >> it's part of it. we talk about four gray swans,

eurozone, middle east, china, hard/soft landing, definitely soft in our view, and last but not least what's going on here. back to our conversation in may, we said all the focus on the eurozone crisis, it will turn to america pre-the election as it has done and post the election the fiscal cliff is a critical issue. and every day you get a different view. i was in washington, what, would weeks ago, came away very, very concerned because all the experts were negative. and then you sort of felt a little bit, you saw the president reaching out to business and vice versa. you saw the fix the debt movement and ceos making a strong move on the hill. but yesterday things took a turn for the worse. so i guess we'll have these ups and down, but most of the people i talked to wouldn't bet on a solution by december the 31st. in those circumstances, people are not going to make commitments. >> what if we have a solution by the middle of january? is that something that is -- 1 it too late? >> it will be still damaging for the year.

so i think it's tremendous uncertainty. worldwide, asia is stronger. latin america is stronger. i'm going down to mexico shortly. big hopes for mexico with the new administration. but generally latin america leads. asia follows. china is certainly recovering a bit, although we saw a slowdown in the last couple months. mass consumer goods were not affected until recently. africa and middle east is okay. russia is strong. poland, ukraine, czech republic have all slowed up. germany and uk actually better for us than france, italy and spain. >> we were just talking about why the euro has been so strong against the dollar. do you have any thoughts on that? when you go back and forth across the globe -- >> no idea. you would have predicted completely the reverse. and it didn't make much sense. draghi this morning comments about fairy land means that he's looking for readjustment. we had a couple meetings with him. we saw very it tough what he

called actually a september cliff that we saw 25 companies went to see him in frank further, 23 out of the 25 excepting two agricultural companies, 23 manufacturing service companies, all said september was tough. he described it as a september cliff. >> despite the argument about who spent more, here's what i want to know.saw -- just charact like the dems didn't have a super pac. >> i didn't characterize it that way. >> no, because you lost, it was a massive -- >> i guess we'll have this conversation thousand. 150 million spent to oppose obama and 77 million spent to oppose romney. so that's like 2:1. >> you're not adding in the seiu. >> down at $14 million.

i'm looking at the "wall street journa journal"'s page on super pacs. i've got the restore america's future 1rks 42, priorities usa -- >> if you add up all the super pa pacs, they barely balance out the union involvement. >> sciu was down ninth, 14.7 million. >> why are you arguing about this will? the results are out. >> are there lessons for business in the advertising campaigns by the super pacs? assuming that one side went wrong here, where did they go wrong? >> you're focusing on the super pacs and of course it's about the strategists and how they went about it. and the simple fact is the democrats understood the demographic changes whether you're talking about african-american, hispanics, single women. and understanding the changes taking place. i think the republican party is still rooted to a large

september extent in the past. if you look at the nature of the people involved on either side, it was i think predictable that one set of advisers was in touch and the others weren't. >> martin, thank you very much. >> thank you very much, becky. it will always be a pleasure to come back and claim -- i'm simplistic? >> a pretty simplistic explanation for what happened. >> wait a minute. the quality of people is what critically determines the winning of any campaign. >> i'm not going to be mitt romney and say they were giving gifts, but you though which constituents that put him over. la tee thoutino vote up to 77%. >> but the character of the american population has changed very significantly. and you're just denying that. >> i heard that it had changed and we were going to have a republican dynasty forever

during reagan. that didn't last either. >> we have a great discussion in our company as to whether this was an election of the old. i remember one of our political comment at a time tors was convinced that this was an election about the old. because this would be the election where the largest age group, old age group, were going to determine who the next president was. actually it was fought out amongst the young, single women, latin americans. >> but if we have -- >> the lesson that steve is asking for is about technology. the lesson is -- >> somewhere i read about their data mining and use of database are stunning. >> absolutely. so on the day of the election, somebody i know said we know you voted. but your sister who is three or four states away from you hasn't voted. you can call her to make sure. >> we got to go. >> when they send out these e-mail, they would immediately go to the ones that got to the

most responses. it wasn't like they waited a week. >> the lesson for gler shcommer campaigns is to treat them like political campaigns. you're in a war room and things are moving quickly. >> we had eight years of bush. you get bush fatigue. it's very difficult to -- this eight year rule. >> who is going to win in 2016? >> we'll see. but if the economy isn't come back -- >> a lot of people were saying yesterday that i was talking to the democrats will not accept fiscal cliff resolution and one of the reasons is they can blame the republicans, the economy will come off next year, and it will set a base in 13 for 14 and 15 and the next election which will put the democrats in a much better position. you think about it politically, another four year run -- that's a cynical view. >> i hope they come together and

find some solution. >> that's a view that we see in the uk. >> this is where we need presidential leadership to accomplish what clinton accomplish this had his second term. when that doesn't happen, they're not going blame 200 house members, they'll blame the person in charge. anyway, comments, questions about anything you see here on squawk. triangulate is a beautiful word if used properly. squawk@cnbc.com. rise before. i'm begging you. prove me wrong. coming up, we know diamonds are a girl's best friend, but are they good investments, too? [ male announcer ] what can you experience in a seat?

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that make it increase the supply so much the price goes down? >> two reasons. >> first of all it is too expensive at the moment. >> just as expensive as -- >> second of all, whatever we make is still very small. third of all, as long as we know how to detect diamond versus -- man-made diamond versus the mine one, what's the purpose?

what do you want to own? you buy a diamond like you buy a fine painting. you cannot -- impress your friends. what do you really want to own? you want to own the real thing. >> okay. you can even buy -- i guess you can't buy glass that looks like -- >> sure. >> but -- >> if you are -- a wealthy person and you didn't want to wear your actual jewelry out, and -- people assume it is real, from a distance -- >> no. the best thing i can give you is we know how to make artificial rubies and sapphires, exactly like the real thing. right? the price of rubies have never been higher. it is not -- it doesn't really mean anything as to what people want. >> does it behave like other hard assets in terms of the dollar weakens, can we assume you will do well in diamonds like gold? >> it is really -- you are dealing with such a rare item. just -- to give you an idea, a

fine quality five-carat diamond today is worth 3 1/2 times what it was worth ten years ago how much is it worth? >> about $100,000 a carat per carat. five carsat a half a million dollars for a five-carat diamond. three carat will not be three-fifths of that. >> it is going to be -- yeah, because the -- the price goes -- according to the size. probably half of that. the point is there is a very strong demand across the world not just in america for really fine, rare things. same thing happening to the upmarket. what's interesting in america is that that investment aspect of the transaction in jewelry was completely ignored by the american consumer until four, five years ago when they realized you know what, it is not such a bad idea because not

only i make my wife happy but at the same time i invested in something that keeps appreciating. and dab as an investment. >> you never sell. >> it but they buy it because it is a very nice return for their money. >> would be nice if the things you do buy -- >> if everybody -- if everything in the world appreciated as diamond did we would be in much better shape than we are today. >> let's be clear about this. a person goes to a retail store, they pay double or triple the wholesale price -- >> no, they don't. >> that's what they did at keystone and doubled -- at the low end, low end they do. but at the high end, where -- the only way to be competitive like ours the only way to be competitive, vertical integration from the mining to finished product. and for those stones, there is a price which is i sell the same price that you can buy in an auction, for example. you can buy from a wholesaler. it is the price of diamond the same way that -- no wholesale retail price for pits can owe. you know what i mean? it doesn't work that way.

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getting the fiscal fix america needs. >> we are waiting for a serious offer from the republicans. >> i remain hopeful that productive conversations can be had in the days ahead. >> former honeywell ceo larry bossety is here on how to get washington to rise above the politics and get businesses back on track. >> safeguarding the portfolio ahead of the fiscal cliff. the smartest minds in the game will tell you how. >> making hot profit.

>> another american made story you don't want to miss. the second hour of "squawk box" begins right now. ♪ >> welcome to "squawk box." i'm becky quick along with joe kernan. andrew is out on vacation today. the futures are indicated high they are morning. this is coming despite the idea of -- the two sides of the fiscal cliff not any closer on getting any sort after deal done again, we are looking at some green arrows on this friday morning. let's get to some of the headlines that are out there as we. president obama takes to the road today to pitch his already rejected deal to solve the fiscal cliff. he will be traveling to pennsylvania to push his pitch for tax increases on the wealthy. republicans say the campaign-style tactics are getting in the way of productive talks. more companies are announcing

special dividends in anticipation of higher tax rates after the new year. whole foods announced a $2 a share special dividend. also declaring one-time payouts, regal entertainment ends on pharmaceuticals and intel labs among other companies. the german parliament has given its approval to the greek debt deal approved by european finance ministers earlier this week. that means that greece can receive about $57 billion in rescue loans. . >> our guest host today is with us trying to rise above and fix the debt. larry, former chairman and ceo of honeywell. one of our favorite guest hosts. you come about once every quarter, larry. >> i do. >> once a quarter. and -- i don't know. last quarter was -- seems like 10, 15 years ago at this point. doesn't it? >> it does to you. to me it is about right. >> with everything that we have been through. i -- i have had different thoughts today. i i will just -- let you give us your analysis of the fiscal cliff, where it stands and -- do you think that -- would it be

okay to go over or would it not be okay to go over? >> i hi it is best not to go over. i think the opening by the president was disappointing because i think it is unrealistic and not happen. i do think there will be a deal and i think that the deal will be they will announce a framework that will be something like simpson-bowles, increase $3 billion in taxes. i think that will be the framework. i this that they will set a date next year where they are going to get the details in. in the meantime i think that -- >> that's a long way from where we are right now. >> it is. let me explain. people have said that they want to overhaul the tax code. why do you want to raise taxes now if you are going to overhaul the tax code next year and change them again? that's crazy. they won't get -- i think they will make a down payment this year. i think they will announce a trillion dollars or so and then they will close some deductions or have them reduced at a lower

rate. the raise $250 billion or so. they will get some of the sequestration savings to get the other 750. i think they will announce a deal of a trillion. but they will set the framework for $4 trillion and overhaul the tax code and fill in the details sometime next year. i think that will be received okay by the american people. >> where are we? who is it now incumbent upon to respond? was yesterday's offer one of those offers that was so off the table that it is best for the other side not to respond at all? and not acknowledge the offer? or did they -- do the republicans now have to respond? >> i think you have to respond. i think the response by boehner was appropriate. disappointment and totally unrealistic. >> you made it very clear that -- guy said -- you walked away from the talks. no, no, no, no. he said no. >> they have to give a numbers -- do the republicans have -- >> no, no, no. >> it is still -- up to obama -- >> they are so far off the mark. a lot of the comments -- you shouldn't be following it day by

day because it is ridiculous. i mean, there's bluffing, will's posturing. so this isn't serious. i mean, if you were in a business deal you wouldn't be going public with this stuff. i mean, the conversation would be more serious. and you would be closer. they show that deal. >> i don't even understand how we get to what you just talked about which is close to simpson-bowles from where we are right now. i mean -- i understand that that might the best thing for the country. based on where the talks have gone to this point -- >> remember, last summer, they got close to simpson-bowles. when the deal broke apart. >> we are a lot farther away from that. >> we are now. but that -- the president knows we have to have a significant reduction and expenditures here. mine, he's not that far out of touch with reality. so that will happen. >> they said $400 million. >> that was as ridiculous as the $1.6 trillion tax hike. that's not going to happen. >> his -- base wants to keep most of the entitlements and tax rich people to pay for them. that's theired were -- >> that will not get through the house. >> no, it won't. but people are saying that the

house -- that's what i love when they are -- that the house has no power because of the election. it is like you still have to pass a bill to need the house. >> you do. >> simpson-bowles won't get through -- >> there's still more republicans in government than democrats. people forget that. add up the house and the senate and throw the president in will, there's still more republicans. >> i was surprised. even some democrats raised questions about his proposal yesterday. some democrats. so -- i mean -- >> you think it was bad negotiating? did they go too -- too far? i mean if you are trying to buy a company here -- you just -- did obama just offer a dollar for the company? >> yes. i mean -- >> and -- looking -- it would have been closer to the mark. interest wouldn't be all the way because it wouldn't be a negotiation. it would be a lot closer. >> if you are buying a house a million dollar house, you know it is -- if you offer -- i will give you $250,000 for a million dollar house, does that mean you eventually sell it for $600,000?

>> no. that's what i'm asking. you do not call the guy back. they are not serious buyers. they -- they are just -- just messing with us. >> start at 750 maybe for a million dollar house. then you are hoping you can get -- >> mcconnell laughed it off yesterday. he didn't pay attention to him. you shouldn't pay any attention to it other than the fact you need -- >> if they were to stick with it, don't you think the republicans would sago -- >> go zbloeover. >> larry and you can appreciate hard bargaining. you guys can both -- we both have some respect for a guy that goes out and says -- you know, i'm going to be tough on this thing. it seems to me that judging from the republican side and reading the plan myself, there was no give. there was no -- i want to make a deal. >> worry about the negotiations being done publicly and dash some of the crazy things that have come out there. i wonder if it ends up sending the right and left, far wings of the parties, to a position that the leadership can't get back to the table because -- i mean -- when you have all of this talk

that's out there and you are setting expectations, because i do believe the president just set expectations important the democrats on what they want to see as an end result. if he tries to move further to the middle from this he may have a tough time in his own party. >> he may lose face. virtue of the fact he has to compromise to the extent it takes to get a deal. >> may be digging himself in. >> he may have his pulse on the country in the sense that a lot of the polls have shown -- and -- we will have results of our poll next week. get the -- later this afternoon. but -- you know, who -- who is the public saying needs to compromise more? and who will be more to blame if we go over this cliff? who has more to lose is also part of the -- >> on all these polls, steve to get -- to get a majority of people to say you would -- should raise tax owes someone other than them, is month that hard to get a positive reading on it. >> maybe this is a plan that works very well. >> 50% to say raise -- raise tax owes the top two is not that

hard. i mean -- i -- i wish -- there is a great quote that says it is the only country in the world where you can vote for a tax increase that doesn't effect you at all. that's a wonderful country. to be able to vote for one that you can totally azbloyd the same country that elected a president twice in the 1980s that supported big tax cuts for the wealthy. reagan brought the marginal rate down from 90% to 40 something, 48, 46. i for getget what the number was but he was re-elected. >> there is nothing pro-growth. i wish we were talking about pro-growth and entitlement reform. messing around with 2% -- >> all the campaign about job creation. no discussion. >> no discussion about it whatsoever. >> i think that the president has a lot to lose here. first year certainly wasn't in terms of the economic perspective, was a disaster. so you think he would rye to build a pound zags where he gets some response and ning the second -- in the second term. >> unless you are trying to

transform society and -- that is not your -- you know, the pie will grow one way or the other. >> in terms of job creation they had something for infrastructure. there was a lot of stuff in this. >> something like had a. but do you -- >> you said -- we should try not to go over the fiscal cliff. you weren't jumping up and down saying it let's assume the deal -- >> end of the world if we -- how about this? let's say -- good compared with the deal offered yesterday, go over the cliff. >> let's say we got rid of some of the sequester and say that all we really did was go back to the clinton tax rates. would that be that? surprised how much the democrats -- >> first part you want? >> get rid of some of the -- sequestration that people -- all we did for republicans was go back to the clinton tax rates for everybody, three-quarters of the deficit is gone at that point per year. right? raising $750 billion a year. >> no spending cuts in that? >> if -- >> you got to -- >> just to go over the fiscal cliff, you will go back and --

republicans right there would see $750 billion raised every we are. suddenly these -- these clinton tax -- bush tax cuts are so dear under -- for the 98% of the democrats i have never seen anything like it. never seen anyone love the bush tax cuts so much. more than the democrats. first 98% p they hated them all along and now they love them except the 2%. >> they are not going put one thing on the table unless they get the other, both sides. i don't see them just surrendering to tax cuts on the one hand without any expend organize vice versa. >> do you think there would be any growth, anything positive, from going over the fiscal cliff that would ameliorate the damage? >> it depends on what -- the deficit. >> if you -- depends what the alternative is. alternative is what was proposed yesterday, i would go over the cliff and take -- >> so would all the people on the left. >> but on the other hand, i hope that there can be -- >> 50/50? where are we? >> 50/50, yes. >> you don't think it is 70?

>> as a patriot i want to think it is better than 50/50. >> i'm wearing my but only -- >> i am, too. rising above. >> it is -- direct thing right at the -- somebody who is speaking in pennsylvania today. is it pennsylvania? >> pennsylvania today. >> but -- >> that's how i rise above it. >> i felt a lot better yesterday when i was reading the -- talk in the journal. story about how it looked like there was movement on it. i don't know. >> doesn't sound -- maybe we are wrong for focusing on the day by day. >> we will come back and ask how larry would negotiate this deal. still to come this morning, it is the height of the holiday shopping season. we are looking for ways to make money now in retail stocks. we get some ideas next and then the rise above road trip takes us to senator mitch mcconnell's home state of kentucky. find out how constituents there feel about his handling of the fiscal cliff and later, unlike dashing moe's southwest grill.

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welcome back. major retailers report something weak move sales despite a strong beginning to the holiday shopping season. superstorm sandy knocking the wind out of consumers up and down the east coast. joining us to talk about the retail sector is davidberman, founder of hedge fund derden capital. thank you for coming in today. it is great to have you here. we looked at the retail numbers yesterday. and a lot of companies were saying it was just superstorm sandy. it shut down the stores in some cases or kept consumers at bay. how do you think we will fare to the holidays? >> yesterday was big day for retail. those that roar yesterday, genuinely speaking had poor numbers. we knew it was the hurricane. we knew it would be weak. you know. it was supposed to be adjusted in the expectations. numbers came in way below expectations. some of the stocks got hammered, macy's, kohl's. we are trying to make sense of

what that means. we when you go through each retailer in the numbers, really the first half -- businesses really slowed. first two weeks. anything we think of, not the hurricane itself. must have been the concern, you know, about the hurricane and people watching tv. people focused on that. also, you know, with the election people focused on that. you know. so the first two weeks are weak. last two weeks seem to come back and be fairly decent. >> so you think that for the holiday shopping season, that the -- better trend will continue? where do you think we -- >> should continue. i think -- for the most part, the trend rate has been for same-store sales index to be about 5% for most of this year. expecteding the numbers to be 5% for this mop. came out at 2% which is a massive difference. we do think it will stay at 5%, would extra days for the holiday season. the only thing that obviously is a bit after concern is inventory may be a little elevated bus -- the sales weren't there so much in november.

>> they will have to offer discounts to get rid of some of the stuff. bad for profit margins. >> point out something interesting we have a normal weather this year. >> yeah. >> last year was -- warmest -- one of the warmest winters. >> right. >> so -- retail hers all of this winter apparel on hand. they had to then sell it at a discount. >> this year will be different. >> that's right. a very important point. because in retail -- the way it was critical and sway numbers big time to the point we are looking for the outside and get the -- the first quarter in particular, january, february, march, the -- you know the economy was off the cliff. spoke about 5% sales. 7%. because of the way they wanted 2% spread. so -- we think in the first quarter will be -- fairly weak. and -- you know, this is regardless of the fiscal cliff which was lower. you talked about earlier. it is going to be that issue to deal with as well as the fact that you got the weather issue. not a big issue for november. warmer. did hurt the west coast. west coast was really warm.

this year. which was than good for seasonal cold stuff. that also hurt the month of november. for the most part november, december, is not making a big difference. >> january, february. >> first quarter. huge. it is going to make a really big difference. >> how about this tendency to discount so early? i mean, everything -- there were stores discounting before thanksgiving in anticipation of the christmas season. that seems to be a -- change. >> i don't mean politically incorrect in talking about our views on the open or close. i can't help myself. i think it is not good for america. not good for the fabric of the families. and -- unfortunate in my opinion, an opinion thing. because -- you know, almost have no choice. people say you have choice in america. they don't have to go to the stores. they don't have to work. fire me. sure. i'm not going to bother see -- see this laptop for $200. sure. if you want to have money where they are struggling and get a deal they will go to the stores. i don't remember messing with the fabric of society. millions of people -- personally i think it is big mistake. furthermore, it helps retailers

in -- in the one-time game. for example, walmart, opened up earlier this year. walmart no doubt benefited and probably hurt everyone else. they opened up earlier. mace's -- helped macy's last year and helped gap this year to some degree. that's a one-time benefit. helps them now. it hurts someone else. retail is -- some gain. they were weaker than normal. more aggressive. next year we will catch up. what they do is they are forcing all the retailers to open up earlier as well. that's unfortunate. >> we want to thank you very much for coming in today. we will check back in with you. >> thanks. appreciate your having me. >> coming up, apple getting go-ahead to sell the aye phone in china. details after the break. later, tacos, burritos, the fiscal cliff. the founder of moe's southwest grill on how business is going and how changes in health care will affect franchise owners.

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now the answer to today's aflac trivia question. when type of oil is traditionally burnt to light the lamps during the indian festival of diwali? the answer -- mustard oil. >> after back why's iphone 5 has received final clear france chinese regulatedor which is paves the way important a december debut. the clearance is a key in this highly competitive market because the lack of new models there, severely eroded the iphone's market share. china's apple's second largest market and long delay cut the smartphone market share in half to 10% in the second quarter. >> comments, questions about anything you see here on "squawk," e-mail us. you can follow us on twitter. up next the rise above road trip takes us to kentucky.

home of senator mitch mcconnell. find out how motorists feel about his handling of the fiscal cliff issue. hopefully this will be about the president as wethey are his constituents also. eighth ranked wildcats were in south bend last might where the irish were 105-7 at home since the fall of 2006. now it is 106 as they cruise past kentucky. who as we know -- don't they have 100% turnover a year? i think it is a one-year program. a look at futures now. "squawk box" will be back in two minutes. [ male announcer ] it's that time of year again. time for citi price rewind. because your daughter really wants that pink castle thing. and you really don't want to pay more than you have to. only citi price rewind automatically searches for the lowest price. and if it finds one, you get refunded the difference. just use your citi card and register your purchase online. have a super sparkly day! ok.

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welcome back to "squawk box" in the headlines this morning, we are about an hour away from the government's latest read on personal income and consumer spending. economists looking for income to be up .2% for october with spending up .1%. zynga's shares getting slammed in free market trading. new agreement with facebook

removes zynga's special status among game developers and lets pace book develop its own games which it could not do under the old agreement. at a news conference set in missouri, one two of the winners of the record $580 million powerball drawing will be identified. the other winning ticket was sold in arizona. you about that buyer has yet to come poured. >> you don't have to agree to be identified, do you? >> no. >> no. >> biggest shock that either you or andrew didn't win. >> i know. >> i really thought this was time -- >> did you buy a ticket? >> no. >> i would pay not to buy a ticket. >> i was looking up some economic research whether your chances of winning go up or down when the pot goes up or down. there's no -- >> you can't -- 0 no matter what. why do people play more when the pot is higher? more value for the dollar? doesn't your dollar -- in other words, my dollar in the one

instance would be $42 million pot and my dollar would buy me a $500 pot. >> the pot doesn't matter because -- it is still the same set of numbers and same -- >> same odds. >> may have would winners. >> let me ask you, were you disappointed one of the winners was about that arizona? and the other was in missouri? did you expect it would be in the east coast perhaps? >> no. it wouldn't make me feel any better. >> disappointed when i talked to robert frank. joe, get this. i don't know that that pot or half of that pot is enough to have a private jet is the only thing i would want from having that much money. he said you have to take a certain amount of money -- well, take $100 million, to operate the jet which costs a million a year. that's not enough money. >> you don't buy -- >> never. jet. month. >> all right. for me it is just about -- >> wouldn't you want a private jet, though? >> no. i would want a car. i don't need to buy a lottery ticket to fantasize about what having lot of money would mean.

>> you can still fantasize. >> it is a zero -- like i -- i have told you this. if you were -- if you read about diseases, you know, affects one out of 10 million people, oh, i'm fine. well, i mean, 1 out of 10 million are good odds compared to the lottery. pud nick will break through the roof right -- right now and kill me. i don't want that to happen because the chances are much better that sputnik -- i don't think it is up there but -- tax on the stupid. it is. would bucks. yeah. yeah. you have a better chance -- by being killed by a vending machine. walk past than you do -- >> are vending machines dangerous? >> if they fall on you they are. >> somebody calculated the odds getting killed by a vending machine? >> anything happens. >> people have got questioned. kick it and try to get the stuff out and then you are in trouble. >> round it down. nobody wins. i know that they show up -- a person that wins but actually nobody win. >> did you hear about the joke about the people who brought the

bomb on the plane. why did you bring the bomb on the plane? what are the odds of there being two bombs on the plane? it is a good one, isn't it? it is a statistical joke. you don't tell that joke in the line at the airport. >> not terribly helpful but interest. >> 32 days left and hopefully -- >> don't tell that joke even on televisi television. >> we are talking about the fiscal cliff. john harwood just got back from senate republican mitch mcconnell's home state of kentucky. here he is. >> in the senate the challenge is bring together red states and blue states. mitch mcconnell's kentucky is horse country. states represented by top congressional leaders, the reddest of all. among the top leaders of congress involved in fiscal cliff negotiations, the one facing the most home state pressure may be senate republican leader mitch mcconnell. he faces re-election in kentucky and a state where the tea party movement is alive and well.

president obama may have won this election but would years ago, leaders of the tea party movement elected ron paul's son, rand, as kentucky senator over an establishment republican. one leader of that movement who runs a high-end audio equipment business says they could do the same thing in 2014 and this time take out mitch mcconnell if he agrees to raise taxes. >> we should not raise taxes in this country. we do not have a receive knew problem. i would like senator mcconnell to recognize that the washington leaders are like a bunch of crack addicts. they immediate ever more money forever more growing government and it is at the expense of the ordinary citizens that they pursue these policies. >> but the brighter those lines are drawn, the harder it will be to get a deal. william worked more than 20 years on wall street. now he runs a small college here and sits on the board of the henry clay center for statesmanship. the way to a solution, he says, is for both sides to have a

voice. >> both have taken the -- attitude that it is my way or the highway. and americans recognize that that's just not the way things typically get done in this country. and if we continue along that line, we will go over the fiscal cliff and who missouri what the abyss beyond it will be like. >> the united states senate has always valued the reputation as the world's greatest deliberative body set apart from the passions of the moment. the role of mcconnell and fiscal cliff talks will put that reputation to the test. john harwood, cnbc, lexington, kentucky. let's get back to our guest host today, former chairman and ceo of honeywell. john laid out what a difficult negotiation this is going to be because both sides have entrenched and said basically we want to do it our way. i continue to not hear this talk of really bipartisanship of working together to try to find a solution. that worries me a lot. >> i think it should. you know, one of the ways it seems to me you go about this is you -- you take it out of the

press, mum one. and you get the principals in a room and you -- set a framework. for example, it is pretty obvious we need a substantial change here in terms of the way we run our government expenses. so there's -- there's pretty much approval at $4 trillion is the right number over ten years. you think that would be agreed upon first. then you would put a framework on how much for taxes, no talking about what kind. how much for expenses without talking about what kind. and see if you get agreement on that. and then -- go and down into the detail and see if you can reach with some compromises how you get there. the more you put it into the press every day the less likelihood it seems to me you are going to get to the right answer because everybody is on the defensive and then they lost. >> right. >> you don't want to create losers. that's right. this is the way government works. that's why you oftentimes it doesn't work. but i think there is a way to get this done in and not have it in the press every day although -- larry the one thing that i -- would say is -- you can look at numbers and realize

that something has to be done in terms of how we are spending and how we are raising receive knew. all of these issues. maybe that's not something that the american people wants to go along with at this point. it is not popular to sell things like higher taxes and spending cuts. that's something that if you rewant the american people to go along with and probably needs to be more of an education process to say look at the numbers, here are the numbers. we haven't heard that. >> i think that's right. remember, we do elect representatives of the people. they should understand it. when you are running at a trillion dollar plus deficit every year and have $16 trillion worth of debt, it is 100% of gdp, that's a signal we have to do something. so i wouldn't expect all the american people that haven't had much exposure to this stuff to be fully cognizant. i hope the representatives are. >> but do you have people that say there is not a problem here. some -- like paul krugman who is a nobel prize-winning economist knows more than people on the street were doing this, he says you shouldn't be doing this at this point. >> i think that paul krugman

is -- remarkable record of being wrong a lot of times. and -- i know that he has been -- nobel laureate and i won't be. but i think there's -- any serious person recognizes there is a problem here and we have to do something about it. >> how come we are still not talking about simpson-bowles. you are. it is not happening. >> i think it is in the background. in a lot of people. i think that is the framework in terms of how we are going to get there, becky. but -- for whatever reason, everybody wants to say it was their invention. they don't want to give the credit to simpson or bowles. but i think that is -- that's the framework that's going to -- ultimately be seamed. but -- we are a long way -- given what the president said yesterday, we are a long way from there. and -- i just hope we can narrow the gap and make some kind of a compromise, avert the cliff, and move on. you know, joe asked earlier, okay, guess it is 50/50. i think -- at the end of day they will avert it. it is close. close call. >> most people don't take 50/50 and i think they are wrong.

they say 15% we go over. i don't know. i don't know whether to believe obama or not. that's the thing. do you? >> i don't know why he gets out as far out as he is. >> he never wavered from where he is. i will veto anything. but the you how has sent signals astride what he says said. >> saying maybe not the higher margin of tax rate may not be the end all, be all. maybe lower than the clinton era. yesterday it seemed like there was -- things happening behind the scenes. >> yes. >> you know, unfortunately he -- he isn't the only person that decides this. he's -- got to get -- something that's acceptable to both sides of the house and, you know, so far i think we are a way is from that but hopefully we will narrow the gap in the remaining 33 day. >> larry is us with the rest of the show. we will have much more from him the rest of the program. former pennsylvania governor ed rendell and former senator judd gregg sound off on how you could go about getting a debt deal in washington. up next, from burritos to the

fiscal cliff, a little food for thought in our american made series. we have the president of moe's southwest grill. "squawk box" is back right after this.

checking the futures now, they will probably see a bit of an opening move higher. see if anyone talks. today more on what's moving the markets this morning frin a coue of minutes. peter is very quick on the gun, as you can see. i think i saw it from peter that mitch mcconnell was laughing yesterday and i saw boehner. comes out immediately. at the end of the week he goes back and says this is what was good about the week this is what was bad. we will get the comments firsthand. >> are american made company today is sizzle. 2012. pretty spicy profits. paul davaco, president of moe's southwest grill joins us. good morning, paul. >> good morning. how are you? >> let's talk about how -- how is business and what is -- how business is at your franchise and your company telling us about the health of the consumer? >> the business today could not be better. our comps are up over 8% over last year.

and today -- as of right now, we are opening a restaurant every five days somewhere in the u.s. >> 477 restaurants, did i get that right? >> 478. we opened yesterday another one. >> it is notes are old. 10,000 employees. let me get to the second part of that question. because you are doing well is that coming dash consumers are in good shape or is that the consumer trading down? >> i think a little bit of both is happening. the consumers are in good shape. a lot of them are trading down from casual dining and also seeing some trading up from fast food. we play in that fast casual segment with the $10 average check. we are not at 15 ask we are not at 5. we are in the sweet spot and that's with your seeing a lot of success with our brand. >> why do you think the brand is doing so well? is it the food? is it the service? one single thing of success >> i think if there is one thing, it is food. our food mission where we have all until chicken, you know, grain-fed pork, grass-fed beef, no added hormones, lots of great attributes of our ingredients

are attracting customers 5-year-old to 75-year-old. look at the time kids meals and offering the same ingredients in the kids meals. it is not something that's done today in the restaurant business. >> we hear a lot about the value perception. it sounds like it is -- there at your -- at your store. >> yes. when you play in had a $10 average check sweet spot, you have families, families of four, five, that can come in and dine without having to worry about the tip or the slow service. they get the customized everything that they want. and at the rate that they want to customize it. and then enjoy your great meal with the family at a high energy atmosphere. >> let me ask you, how many of these -- do you own some of these stores? how's your business model work? >> 99 peshz franchise. we have four company restaurants in the atlanta market that we use for training and testing. >> none in jersey yet? are there some here yet? >> there are restaurants in jersey but not company operations. they are all based in atlanta.

>> i have never seen one. where would i see one in jersey? >> you will see one, everything from south jersey to north jersey. we have about 25 restaurants. >> how much is a franchise? >> a plan choice fee is $30,000 for a single store deal. >> has to be a lot involved with setting one up, though. >> are there -- mexican food, worst mexican food is great for me. i have asked -- i tried to get everyone to put mexican restaurants in my neighborhood. it is hard to find. i would eat it every night, i think. i'm not sure why. >> biggest challenge that we have with getting more restaurants open. today we have over 340 signed franchise agreements in our backlog. our biggest challenge is finding the right real estate to get those restaurants out of the ground. that's the challenge we face today. >> is obama care a problem? >> it is -- it is going -- i think it is going to be a problem at some point. there's still a lot of unknowns with what obama care is going to mean to most.

the average moe's franchisee has 25 employees. if i'm a franchisee with one restaurant it won't affect me with the 50 basis employee base. if i have ten restaurants, it is -- absolutely going to affect. we are thinking somewhere in the neighborhood of 5% to 7% of labor cost. we can see a negative increase there. >> some people are -- some companies are charging their employees more because of obama care and other companies are limiting the amount of people they hire. are you doing either of those? >>, no we are not. we have a wait and see mentality right now. our job is to educate the franchise community and keep them informed and educated so they can take the right decisions when those times come. right now we are not doing anything. we are not taking any -- drastic action with obama care. >> i want to ask you if your growth is limited by something that we are increasingly becoming aware of which is -- the huge growth in latino

demographic in this country. a couple of blocks away from me are -- series of fantastic cheap mexican restaurants. does that limit your growth or something that enhances your growth prospects? >> what that does is -- it is -- enhances it because the flavor proceed piles become known before we get to them a market what a we bring is more than just, you know, southwestern mexican food. we bring a whole level of energy to the environment and we bring things that the competition don't bring. and we are -- we are providing a dining opportunity for families that they can't get anywhere else. >> one question. do you -- you get pressure on your menu in terms of this -- american diet fad that's going on? have you changed your menu over time to be -- somewhat responsive to that need? >> we are doing that kind of behind-the-scenes. tony la russaed sodium across our menu last year by 50%. it is not something we advertise. we have. we have calories on our men use in new york. and so we are prepared to take a

leading role on that. and -- >> i know what i'm getting into, paul. please don't. if i come in there, i know what i want. don't give me something i don't want. >> that's the great thing about our concept is you can come into moe's and have a great healthy, even vegetarian meal -- >> that's not what i want. >> or you can get a 20-ounce home wreck their will satisfy you for the rest of the day. >> all right. >> paul, come back again and bring more samples. thanks very much for joining us. >> all right. thanks, guys. when we come back -- >> hold on. he's going. >> oh, boy. he's going wireless. >> nachos for breakfast. what's wrong with that 234. >> former governor ed rendell and judd gregg rising above and getting a deal done in washington. investors want to watch shares of pizza hut. the company also disclosing

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fiscal cliff comments continue to move the markets in all directions. where should you be moving your money to protect your portfolio?

joining us now from new york is peter, cnbc contributor. i was talking about -- probably listening but i told you i heard about -- actually hi seen some of it but immediately got e-mails from you on the most salient points that he made. where do you think we are -- we were talking about if you are going to buy a million dollar house, you might think why don't i offer 100 grand. if they come back at a million we will split the difference at $500. you will not get the house for $500,000 if the -- if the owner knows it is worth $1 million. what's obama doing with this first offer, do you think? >> i'm not exactly sure because i don't understand the economic rationale behind it. look at the world that we are in. it is a 2% u.s. growth rate. it is not the 3% we are historically used to. look what's going on in europe. look what's going on in asia, the slowdown there. look at the context at which we

want to take money out of the private sector. taxes by definition is contractionary. >> for a while i wondered in first term figured look, the president sooner or later will realize he needs jobs to get re-elected so will come onboard with pro-growth stuff and jobs he was able to, you know, to be re-elected at 7.9%. now you want a legacy that shows that you had a good economy and that you got the jobless rate down. so you are going -- i'm -- maybe there's just a disconnect between whether people that work for him really understand what generates economic growth and jobs and what doesn't. and -- i mean, we will transform society in a way that maybe is more positive for him, obama care, redistributing of policies. but -- sooner or later you want everything to go well in terms of growth, don't you? does it ever hit home?

>> not yet. but -- it will be the economic cliff we discuss in 2013 if he wants -- if he gets away with raising taxes by $1.6 trillion. hope reply soon. and -- again, only 2% type growth rates. what do you want to do? take 1% right out of the u.s. economy andsy okay, we will cut spending later. it doesn't make any sense. even from a negotiating standpoint because now the optics start to look bad for him because the republicans gave in. they said we will raise receive knew by $800 billion. so i don't understand the -- leverage that obama thinks he now has. >> what do you think will -- what would you propose in terms of a solution to this -- gnarly problem? >> it comes down to the three entitlement programs. if you can control the rate to 2.5% and grow the economy 2.5% to 3% you won't have a budget deficit in ten years. revenues will go up $130 billion

into the federal government. that's without one tax hike. that's because of economic growth. so this belief that you need to raise tax is to get revenue is a palsy and it is a false choice. but, of course, that's what we have drummed up in washington. >> what's -- what's the potential of the economy right now? where do you put that number? >> it is 2% at best. we are seeing -- now we are potentially seeing less than 1% tight population growth. and we are seeing at best 1% type productivity growth. at best it is 2%. and, again, you -- extract 1% out of the private sector in 2013, it certainly -- less than that. >> is that 2% -- are there policies you think that could bring it up long term to 2% to 3%? >> we need to get back to a savings and invest-type culture. not a borrow and hope to invest-type culture. so -- that obviously eats into federal zero policy, does not encourage savings and encourages more borrowing and spending. yes, we could grow higher than

2%. no question in my mind. it is just the policies need to be placed to encourage that. again, we lack savings and we encourage borrowing and that's the wrong policy. >> i'm -- i'm going to sell everything. what's what should we do? should i just sell everything, peter? i don't have anything. >> nominal prices will remain elevated as long as we have globe a money printing. there will be a perception things are okay because nominal prices are high. on real after-tax tax basis, it is a much different story. >> yeah. you get a cap tamm gains and -- should you sell the share? capital gains taxes going up? dividend stocks aren't going to be worth as much. how do you -- is it already reflected? >> well, from a capital gains standpoint yes, you should take your gains. from a dividend perspective -- the fed is already screwing savers by having rates at zero. the government will screw savers more by taking more out of your dividends. unfortunately savers are going to have no choice but to own dividend paying stocks. >> joe is not paying attention.

buy lottery tickets and open a moe's franchise. that's what we should do. >> someone tweeted i have moe's tortilla chips. >> up next, up next -- thanks, peter. gop criticizing the president's proposals for taxes and spending increases. dems telling the republicans to bring their ideas to the table. can the two sides get together and get a deal done? we ask ed rendell and judd gregg about that and much more "squawk box" is coming right back after a break. for many, nexium helps relieve

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president obama makes his opening bid in the debt negotiations -- >> last call. 1,200. >> -- but republicans are not buying. >> would the gentleman please cooperate. >> what will it take to bring the two sides together to avoid the fiscal cliff? judd gregg and ed rendell will join us the co-chairs of the fix the debt campaign. >> venture capital fund behind clout. third hour of "squawk box" will begin right now. ♪

♪ i have never seen anyone looking so fine ♪ welcome back to "squawk box" here on cnbc. first in business worldwide. i'm joe kernan along with becky quick and steve liesman. andrew ross sorkin is being waited on right now by staff somewhere in a third world country. guest host this morning, 1 percenters do when on vacation. our guest this morning, even at ceo has not been treated -- served like this, i don't think. larry, former chairman and ceo of honeywell and cnbc contributor. more from larry in just a minute. steve has your headlines. did you hear about this place? >> i didn't hear about it. i really want to know. you vice president told me in the break and i'm dying to know what we are -- where this place is. lawmakers now admit they made no real progress on the compromise to avoid the fiscal cliff. republicans are rejecting president obama's proposal which includes $1.6 trillion tax hike.

$50 billion economic stimulus package and -- new power to increase the debt ceiling without congressional approval. all of that sounds like a winner. the offer featured higher tax rates for households making more than $250,000 a year. no surprise there. one-year postponement of the sequester and about $400 billion in savings over ten years from medicare and other entitlement programs. they did do something. we will come back. german parliament has given its approval to the greek debt deal approved by european finance ministers earlier this week. that means greece can receive -- euros in rescue loans. and zynga shares getting slammed in pre-market trading. new agreement with facebook removes zynga's special status and let's facebook develop its own games which it could not do under the old agreement. where are the markets? i have a nice thing there. the markets are -- looks like we are up on the nasdaq, futures,

gold up. s&p up. opened to the upside there. the futures are kind of weak in this one. still within the range will. nasdaq up a bit. search points on a percentage basis. next chart. europe next. let's see. we are going to look at asian markets which are up about half a percent. more or less across the board. >> we are now 31 days from a deadline for a budget agreement. what's it going to take to get republicans and democrats to rise above partisan politics and compromise on a debt deal? joining us right now, co-chairman of the fix the debt campaign, former new hampshire senator and governor judd gregg. former pennsylvania governor ed rendell. gentlemen, welcome to both of you. you are the perfect people to have here and help us interpret what's going on with the negotiations. you both know politics well and know what's happening in washington. judd, start things off and explain is it as dire as we think it is by reading into some of these headlines today by seeing what was said yesterday? >> i don't think so.

i think that -- you have a situation where you have this unique period in american governance, every power years where people can govern because politics is a little bit behind -- little bit back, takes a back seat during this period. everybody has run for office and know their position of power, musical chairs. everybody has their chair except mitt romney. plus you have a forcing mechani mechanism, the fiscal cliff. congress needs forcing mechanisms to act. plus, both with the president and speaker they have a reason to reach ain't agreement. political reason. the speaker it is because he knows republicans will take the hit if we go over the cliff. that's the way it is. the president has the microphone. and the president -- cane believe he wants to start the presidency out with a recession. i mean, this -- next term. so there -- i think there is a genuine identity of interest. i think at some point, maybe -- hopefully sooner rather than later, that it is later. they go in a room and sit down and they work off their framework they had would years ago and -- they reach an agreement. >> you know -- i would like -- >> basically simpson-bowles, i

hope. >> i would like to think that's what happens. but -- you see where some of the starting points are here. it doesn't seem like it is -- any way reaching towards that sort of agreement. especially in 31 days and counting. what do you think is happening. >> well, i think judd is right. i think -- hopefully exactly what's going to happen. i think the president's learned that -- a lesson that when you negotiating, you don't put your opening offer on the table and make it exactly what you want to wind up with. dollars 1.6 trillion in receive knew. i think the president probably knows he will not get $1.6 trillion in revenue. if he started at $1.2 trillion probably wouldn't get $1.2 trillion. >> what about the $400 million in spending cuts? i can 125u7bd starting at $1.6 trillion. we knew that was the number he was looking at, wind smup where between 1 and 1.2 trillion. the idea of reaching out on the other side and saying we are going to make serious cuts, too, that 400 million is not what anybody was expecting to see

there. >> no. i think that number comes up, too. that's the nature of 234eg officialations. problem with what we do is we negotiate in public. if this was a union -- management negotiation, you wouldn't hear the opening bids and you would only see what they eventually would end up with. judd is right. have to get past the rhetoric and posturing. and get down to work. and i think we get down to work, we can do this. >> but, ed, you talk about how this isn't your opening position. if you were going to be looking at somebody something -- >> this is your your opening position. >> if you were making that negotiation the idea of getting to -- if you want to look like simpson-bowles, $1 trillion in tax revenue increases and be $3 trillion wron in cuts. i don't know how you goat those numbers from where you start at this point. >> well, it is not going to be an easy haul. i think you are going -- we are going to get there and we are going to get close to those numbers. look the president said during the campaign that that was a framework that he -- he was okay with. i think it is going to wind up

fairly close to that. >> if this were union negotiation, 18,000 people lose their job and wouldn't make it -- win keys anymore. that may not be the best. i just -- i don't understand -- >> successfully negotiate. >> what you have understand here speaker boehner is in a position where he can dakota lack of better words -- salt and pepper on the toes of the constituencies, hard right. we lost the election. the president -- folks that delivered him in the election, he might give on the entitlement side. he will have to give. the speaker can't go home and deliver a deal that doesn't have significant savings and entitlement savings in it. you are not going to see those cards played now. it is far too early. >> how the election changed this negotiations. are we -- i have a perception that the white house feels like they won the presidential election and that gives them certain currency -- >> no question. >> the republicans feel like weaneded up with the status quo so there is no real change in power balance. what's the reality? >> think -- i think the white

house's political staff ran over the republicans in the election -- they were able to run a social issue election in one of the worst economies of all time. now they are trying to back up over the republicans with in this proposal which is outrageous. >> back up and forward. >> i think it is clear that the president won and he expects to get his revenues. i think the speaker understands bass he said -- i think the speaker is right. i think he described the piece, we will give you revenues but you have to have entitlement asks have to have savings on the table or you are not going to get a deal that has any sort of long-term oomph to it to getting deal under control. >> i want to ask you the same question. does dash i mean, obviously we see the -- in the past. saw president bush overplay his hand from his mandate that he thought he had. that didn't work out too well for him. he is the president. does this offer from him suggest he's about to overplay his hand? >> well, two things. number one, just to follow up

quickly. on what judd said. every republican said they would consider revenue has said we want to see some real spending cuts first. so i think it is incumbent upon the president to put real stuff on the table. so this they can weigh it politically. they are going to have to make a tough political, they are going to have to get something in return. that's the nature of the negotiations. there is a difference between president bush and president obama. what president bush was pushing with his so-called mandate was an idea that was inherently unpopular with the american people. what president obama is pushing is an idea close two-thirds of the american people support. huge difference, guys. >> do they -- do they support the idea -- i mean -- i know that -- support the idea of tackling the deficit. when it comes down to ream spending cuts and programs that they may rely on to get taken away, are they going to support that? >> no. that will have to be like -- giving -- the patient a very difficult shot in the arm. there's going to be some pain. the president has got to be --

your call. the president has got to be willing to administer pain to some of his own supporters. but that's the nature of the negotiations and it is the only way we are going to get there. it is important for constituent groups to understand. judd and i have spent a lot of time with business leaders and business leaders who have responded and they are getting message out to republicans that this debt crisis must be solved. it is so important to the -- short and long-run outcomes of our economy. and we have to have democrats on the president's side saying look, we are going have to give and we have to get our people ready to give. >> judd, what do you think the consequences are if we do go over the cliff? >> i think that the -- i thinking the congress reconvenes early. congress usually doesn't reconvene until after the inaugural -- end of january, january 21. they reconvene in the first or second week and put in some sort of patch almost immediately that

resin rescinds almost everything. it is a forcing mechanism and should be used to get a big -- what we need as a nation is a big deal on the issue of how to get out debt under control. that's when we need to get our country going. the president has to appreciate that. the speaker has to appreciate that. they both win by governing. i mean, this is -- a unique situation. they both win by governing. that opportunity sitting there for them to take. i think that -- i think they both are sophisticated enough to realize it. hopefully they go in a room and do it. >> it is only a big deal -- only a big deal that will set off this positive chain of events that i think will be a huge boom to the american economy. we have to go big and we have to really solve this problem. >> i think there's -- there could be a high chance that there is a deal but that nothing big gets done. if that's the case -- >> that's the problem. >> that could be the path of least resistance. >> that's kicking the can down the road. >> right. >> i hear you being critical of

the president. you don't like his offer yesterday. sounds to me like what you are saying is there wasn't enough compromise in the president's offer yesterday. >> no. it was a -- a good -- look, i have done -- as governor and mayor thousands of union negotiations. you start out with a position you don't expect to wind up with. there ought to be people -- back channel people saying that in washington today. i think there will be. i hi judd is right. this isn't going to get done until the speaker and the president get serious and get down to real negotiations and that will happen -- >> you have been -- you have been off the reservation before. not like cory booker or something. he said stuff before. you are a hillary man. >> -- said it made him unusual us private equities. >> and -- you know simpson-bowles and it sounds like you are -- at least would consider something like that. there is -- there are -- president's base, that's a nonstarter, the president's base. isn't it?

>> it is. but sometimes you have to take a chance and deal with your own base and do what's right for the country. and -- i think that the president at some point in negotiations will have to do that. >> i said that this to harwood. at least harwood -- you are -- now you are -- at least you are trying. you have become much more -- to the center from when we used to talk to you before. at least someone is. >> absolutely. there are democrats out there. look, dick durbin voted for simpson-bowles. >> i know. and i saw what you are say being entitleme entitlements. i was shocked with that. i was gratified. but -- there's only -- you know -- you are not seeing it from the guy that needs to do it. >> you can't get very much. >> that's 60% of the budget is -- what's driving the growth of the dpoft and driving the deficits. you have to step out and address that issue. you don't have to do it all at once. as a practical matter can't because of the health care

issues are so complicated. you have to make major stride and set in place mechanisms which continue to return to tissue and get action on it and -- you can't expect house republicans to agree to a very significant revenue hike. the speaker said he will agree to revenues. unless they get something on the spending side -- substantive and long term. not just a simple, small, you know, discretionary event. >> the only -- thing i would say, guys, is -- this is the first inning of this baseball game. don't reach any conclusion. >> that's good. probably get too caught up in the database. we will take that to heart and try to pay attention to that. governor rendell, senator gregg -- >> i wish the two of you matter. >> they do. >> any influence at all. >> rise above. probably should be upside down today. should be sinking slowly. >> governor, do you have a rise above button? >> no. i tell you, we are just xs. it wasn't as bad. one liddy said to me -- she

stopped me and put her arm on my arm and said didn't you used to be ed rendell? >> didn't you used to be somebody else? >> year always somebody here. gentlemen, thank you both very much. we certainly hope people are listening to what you are talking about. we will have you both back to talk about it. >> coming up, more from our guest host. venture capital firm behind tech disruptors that lets users design and sell their own video games. we will talk to john frankel. technical analysis streamline their process? at fidelity, we do it by merging two tools into one, combining your customized charts with leading-edge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. we like this idea so much that we've applied for a patent. i'm colin beck of fidelity investments. our integrated technical analysis is one more innovative reason serious investors are choosing fidelity.

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welcome back to "squawk box." shares of groupon are sliding like they were yesterday. the company spokesman says andrew mason will remain ceo. the board of directors deciding to retain the company co-founder as head of the struggling online marketer of daily deals. the stock had jumped earlier in week when mason said he would fire himself if the board decided on that step. down about 4%. shares of five below popping after the bell yesterday. the discount retailers same-store sales already strengthened. the company raising its full-year guidance.

movie theater owner regal entertainment special cash dividend of $1 per share. shares rising on the news. what was the number last night? $20 billion for special dividends? declared through the fourth quarter. compared to trying on get ahead of what they believed to be, hikes and dividends and cap tamm gains. >> okay. more now from our guest host today, larry, former chairman and ceo of honeywell. one thing we haven't talked about is you have a lot of contacts and, you know, ahead of storied business career. what do people -- feeling in terms of right now? did we do 2-7 in the last quarter? did it feel like the to them on gdp? >> they found -- >> i will tell you something, if you talk to people in america, the economy feels pretty good. you know, you read stories about europe all the time. of course, that's troublesome. the economy here is okay. i think that there is a concern that the action isn't taken to continue that strength. now, it isn't 4% or 5% as it is

after most recessions. but it is not too bad now. so -- we still immediate job creation. we still need to deal with our deficit. that's why this fiscal cliff discussion goes on indefinitely day by day. it is a crucial point in america and we got to come to a conclusion which is helpful to everybody. >> prediction time. you have to make any -- predictions? >> for next year n. >> yeah. i have to make one. >> 2%. >> here is what i want to ask you. what's the biggest threat to the u.s. economy in 2013? i will give you a couple of choices. wry want to do fiscal cliff. is europe still -- could it be a huge threat? have we -- have we moved far enough along there that -- with sort of dealing with it where that is not going to be the threat that we saw? >> for business in my mind, the threat is not that europe will come apart. they will hold it together. but the economy is not growing. export markets are weak.

they are weak in eastern asia, too, except for china. china is going to be way down where it was. probably 7% next year. i think that -- the -- the u.s. has been a very successful exporter. these mark et cetera are going to be soft next year. i think that's going to hurt us. >> i rye to -- i mean, i'm trying to think -- it just for 2013, the biggest threat to the u.s. economy, first i figured -- the biggest threat for 2013 is the same as the biggest threat for 2014, '15, '16. not dealing with entitlements. that's what i think it is. >> did you said you took the fiscal cliff off the table. >> took that off. i'm talking about long-term, $87 trillion and unfunded promises that we have made and we are not -- not really a government that was set up to -- to have cradled -- >> dealing with entitlements a euphemism, though? what are you really saying? both these guys, rendell -- live with entitlements or raising taxes -- >> month, no,no. it is not raising taxes. i don't think we were set up as

a -- a country that was -- between the really -- a strong safety net for those truly in immediate. we weren't set up to be a cradle-to-grave social services society. that's where we were headed. we are knot set up to be that way. >> i think -- i think it means that you are going to get less than you think you are going to get out of that these entitlement. >> you could do it -- you can address it if do you it now on a more gradual forum. simpson-bowles is talking about raising the -- >> we -- no. i thought -- it could be iran. it would be a dirty bomb if a terrorist is still trying to do that. what's the biggest threat for 2013 -- >> i have done that. >> no. i need help with my prediction. >> my biggest threat, i think, we don't make progress on employment. i think that's a -- recurring or gathering storm for this economy. >> we might not. >> long-term unemployed -- i think we have to start to make a dent on this. we have to start to think

about -- how to put these people back to work. >> you should have changed the way you voted then. much more from larry throughout the program. >> read on the consumer, personal and income spending numbers. john frankel's ff venture. hottest tech innovations at the bottom of the hour. wait until you see what joe is wearing. let me see if i can do it. ♪

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welcome back to "squawk box." young brands is a stock we are watching this morning. shares of that company are under pressure after same-store sales in china would be down 4% during the current quarter. the parent of pizza hut, taco bell and kfc gave a full-year forecast that was below street estimates and remember, guys, we thought this was the one going to escape you will of those issues last time we heard from him. came as a surprise to the markets. that stock is down by 7.5%. with we come back, we have breaking economic data. a few minutes away from personal income and spending numbers forring october. right now as we head to a break, take a look at the u.s. equity futures which have been higher through the morning. losing a little bit of their gains. e want to improve our schools...

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. welcome back to "squawk box." we are just a few seconds away from personal income and spending numbers. we have been taking a look at the futures this morning. you can see right now those dow futures are you by about 26 points.

s&p futures up by 1.5. above fair value. had is happening on a day when we have not heard anything good about the fiscal cliff coming out of washington. first time the markets are ignoring any of that talk and powering on through. we will see if that continues as we get through the rest of the day. rick santelli is standing by at the cme in chicago. rick, we have been waiting for the numbers and waiting for something else to chew on. we will send it to you now. >> all right. well, here's a little extra chew for you. personal income for october, goose egg. unchanged. personal spending, spending side of the equation, down .2. not a model formula for the way we would like to see this number come out. i personally would like to see it come up big and spending down about where it is. you know, get the credit side back in order, personal balance sheet. anyway, down .2. unchanged on income. no revisions. we could look at all the internals but i have personally -- whether it is deflator, person a consumption expenditure.

i don't see a lot there. personal consumption, expenditure core, up .1. all these are in line. what we walk away with here is the spending side is down and when you -- guess when you look at what's going on with income and -- what -- was discussed a little earlier, i heard when i was in my cubicle with steve about jobs, this all comes home to roost. and i think it is very interesting to con to monitor. on this weak data slipped under 160 yield. not that we haven't seen it before. as a matter of fact, the -- you know, the fixed mcmarket hasn't been the big story. their big store write is the big picture. i think the big store write probably is more along the lines of all the record corporate issuance and dividends and -- of course, many companies rushing to beat the tax man. >> back to you. >> i-want to read from you the release here -- i don't know if this helps to understand what happened here. these number missed.

it says -- the october estimates reflect the effects of hurricane sandy. the storm affected 24 states with -- severely damage in new york and new jersey. bea cannot quantify the total impact of the storm on personal mcand outlays because most of the source data reflect the effects of the storm that cannot be -- the identified. >> i mean, it is probably not a surprise when we heard from some of the individual retailers. >> right. >> that sales were down -- not up nearly as much as expected despite what they saw as a very strong holiday shop season. >> one more thing here. it says b.e.a. did make adjustments with stores data not yet available or did not reflect the effects of sandy. two things. one is that this does not contradict the general sense of wages and income being weak. what i don't know and i can't see from this number is this weak mcbecause personal government transfers are down? or because wages are down? i'm going have to look at that number right here.

and then the spending numbers being down, that seems to me to be the most likely place where sandy had an effect. it is on the consumption side. savings rate did bump up a little bit to 3.4 from 3.3. >> the stock market at least, equity market not really reacting to what seems like the idea that the washington, two sides getting further apart. this is not something that -- it is not where i expect to see. >> it becky, let me stop you right there. everybody loves you because you are so diplomatic. you really are. have you many fans in chicago. on this one, i think i have to go the other way. the president won. everybody knows that. seems to me -- and mr. boehner, some of the republicans, are definitely eating a little post-election crow. receive knews are on the table. to see the deal that they came back with, to the victor goes the spoils and spoil the country and the process, you know, rise above. i drop my pen running to the

camera. various lot of them going to wear them. in the true spirit to rise above, i would think everything we should cover today would be, you know not only are we not cutting spending, we are raising spending and raising taxes. when we think of bowles and mr. simpson, you know, what i found fascinating is, you know, who put that commission together? the president. we all keep talking about it like, you know, that was part of the campaign, you know, that was a centerpiece. seemed like everybody was onboard. becky, truly -- isn't it apparent why the president didn't do it? the deal is crazy. he doesn't want to can you spend. >> $1.6 trillion was not the number that surprised me. it is the $400 billion in spending cuts that surprised me. i don't know how you get to anything, anywhere close to 1 to 3 with those numbers as a starting point. honestly, what surprise meese morning anything, rick, i know the things get played out

publicly in politics. to me this seems like the type of situation where you have a much more difficult time trying to get your base to come around to some -- >> wait a minute. when is the next election, becky? >> two years. >> okay. why does he need to pump up his base and go on the road? he won. what is this for? what is this trying to do? >> if people come around you and i think that's -- that's what blew things up in july of 2011. you don't get your wing and -- boehner could not get his wing. >> put pressure on their congressmen. >> i'm going to agree with rick on this. i think real leadership is governing from your surplus, not your deficit. i think what rick is pointing out is he's won the election and he has the ability now to go to his base and extract something there and he doesn't owe them anything. for two years. and also, to the extent that we were talking earlier, that -- the -- the real thing that should matter now to the president is his economic legacy. he got a gift in this election when the numbers showed that

more people blamed president bush for the economy than -- that's something that just -- not going live, you know. if you could solve the deficit -- >> what if you could narrow the income disparity and not get above 2 gdp growth? no. >> you could transform companies and economy goes on -- >> wait a second. if your priority is the jobs, to go after jobs -- it was never in the first place. >> priority supposed to be -- >> president should be thinking about how he can clear the decks right now to get business to invest. >> but, steve, how do you get from where he started to where you want -- >> what you want to do, get rid of the fiscal cliff uncertainty. let me make one other point about this. we have taken an increasing part of the tax code because of the -- political dysfunctionality in washington and put it on the yearly basis. and -- what the fiscal cliff is essentially taking the personal

income tax code and putting that on a yearly basis. it is just -- no way to plan and to -- and to do business and strikes me that if you can solve the fiscal cliff problem, get tax reform going, create the field, you could extract more, i feel, from the wealth write and even -- from business and get rid of deductions. what i hear so many people -- >> hard to extract from the wealthy, though. did you read that op-ed in the journal today? we had, what, mr. jim -- this will be the entire santelli exchange today. >> i read that. >> spoke at the democratic national convention. putting the money lou. does that bug you a little bit? >> i also read the -- >> depressing. >> i also read the op-ed above. >> it the wealthy people that he wants to go after? they escape it. they escape it. >> what's interesting is the op-ed above it has a list of gdp by year and completely leaves out the eight years of the bush administration. if you read that op-ed above it. did you read that one, rick? >> don't give me the switcheroo.

i'm not talking about that one. i'm talking about the one below it, steve. >> i'm talking about 2 one above it. i'm rising above it, rick. >> of course you are because it is so reprehensible. >> no. my point -- >> people go to charlotte and say fairness and then they run to try to beat the tax which is predicated on the jobs. >> he doing his job as a corporate executive. >> i can't even talk about it anymore. >> he is gone. >> you don't -- there was a quote, one of the chiefs of staff said, mr. president, you knee your -- your overriding power to bring the country back from the financial crisis. >> right. >> he said that's not enough. that was when you knew will is a transformative -- notion. >> did a lot of work to bring the country back. notion that -- >> no. during the first two years it was all about obama care. it was not -- >> do you remember a fiscal stimulus package? >> i don't remember anything -- anything long term to try to --

to -- improv growth and jobs. and he was able. i said he is not going to get re-elected without jobs and he was able to. now we will see in the second term whether -- an economic legacy really is what he wants to do. whether it is a -- >> my point about talking about the -- not -- about the -- the -- journal op-ed, eight years of the bush presidency is that -- i mean -- >> he told you not to do it. now she gone and now you are going do it. >> don't pull a switcheroo either. mint is, if you can -- if you can make this place a -- in his view, a fair country, and forego economic growth, i think that would be -- that might be okay. >> okay. >> fairer in his mind the point i was going to make is i'm not sure, joe, that the american public believes that keeping taxes low on the wealthy is something that's so central to creating -- >> that's not when i'm talking about. has nothing to do with -- i'm talking about keeping taxes, government and taxes, government

small and taxes as low as you can, unleash the private sector. >> i agree with all that. >> coming up, he funds -- disrupters like game salad and klout. talking about the hottest trends in tech. [ male announcer ] this december, remember -- you can stay in and share something... ♪ ♪ ...or you can get out there with your friends and actually share something. ♪ the lexus december to remember sales event is on, offering some of our best values of the year. this is the pursuit of perfection.

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welcome back to "squawk box." hang out for this. a venture capitalist who is behind such success stories as klout it is a content revolution is just beginning. john frankel, founder of ff venture capital, joins us now. good morning. if we could get a shot of what becky is doing before we get -- there we go. becky has a thing on her head where she thinks we will get to that in a second. john, i thought i was hip because i listen the my 14 year owed. give me what this game salad is. >> is he using it already? >> it is a platform for writing video games. what's unusual is that it is the first platform out there where you don't use lines of code. you drag and drop objects. an 8 or 10-year-old, half a million developers, are use thing. written using game salad. >> how does this change the

balance? i think of that as opposition. the con ten now going get more market cap, more capital, gravitating to content away from distributors now? >> over a long period of time i think so. content producers are moving from media companies to individuals. and whether it is a photographer in india who takes a great photo and available in 500 px or a kid who has a great idea for a game and then just has tools available to rate them, that's what's happening. or you on facebook, when you post something up there, you are creating content. >> okay. we are going to get to this cool thing in just a minute. give me one cool thing before that. get to the mind controlling the m kra. give me one other cool thing before that. >> so -- gosh, i'm just looking out. we have a lot of cool things. take proud funding. so crowe fund, ability for people to actually care with

their wallets and the world's large proud funding platform. people from 70 countries every day with their wallets and backing 6,000 different campaigns. it is -- it is kind of amazing. do you remember the story of karen klein? the bus monitor that was teased a few months ago? a guy called max said this is wrong. he posted the video that w-- he said let's raise $5,000 for karen. $703,000 later she had a hell of a vacation. >> talk to me about klout. >> klout measure everything. more stuff online, we are creating too prints around what we are doing. and then you can -- put that together and analyze it and reduce everything down to a simple score. i call klout the dandruff shampoo. before there was cloud nobody

cared about cloud. now they do. they care with it went down. what can they do to take that up. what it is doing is allowing you to understand strangers. and so core centers, call centers, night clubs, hotels, are using this as a way to -- and what serves as had want -- services they want on provide. higher klout score, more influence you are. >> how do you make money? how is money made in this game? >> how i make money is i find a really as if mating team, three, four people, who have a great idea that want to change the world. we give them money. and we wait ten years. and then we get paid out. i will give you an example. cornerstone on demand. i think the last quarter it had billing growth of 78% year over year. >> subscription growth, fee for games? >> cornerstone -- 10.3 million globally. 1100 clients. you know, it is -- a great

company. i originally invested in 2002 when there were four people in the room and the end of year was six clients and now have 700-plus employees. >> let's get to this what's on becky's head here. what is becky doing? >> i don't know if you can see this. >> the technology is something called muse. it is on pre-order available. would portfolio companies working together. you can pre-order this headband which is measuring what is going on in becky's head which some people might consider scary. but what becky is -- >> what's going on in becky's head? i wish we could know exactly. >> it is -- >> what happens is -- >> okay, i'm going turn away from it for a second. there's all this stuff out here, this big stuff that masses 'round by focusing and relaxing and staring at it. >> so you have a pre-production device on your head. what it is doing, as you focus, you are squishing that ball down

and as you relax and get distracted, the ball opens up. so what is happening is it is reading your brain waves running very complex algorithms to understand them. using those algorithms to create signal. and -- one of the things i would love to see is take something -- a ball you can move by just moving a finger on your iphone and connect that up with that and you can move the ball with your mind. how cool would that be? >> i would like that. real one? >> what -- what's the blue thing there? is that just reflection? >> that's reflection. >> i see two balls there. which one -- >> no, you are looking -- hang on. let me focus again. >> you can -- relax beck write and focus that thing and can you click -- >> is there a -- click operation? >> this could be a whole series of tools. only at the api to developers. so they can create new applications that run on this. and -- the purpose is -- if -- before nike plus we didn't know

how far we ran, how many calories we burned. stuff goes on all the time. if you are adhd, if you are driving and you are not -- it is useful to get a signal ahead of time. >> thanks for joining us this morning. as if mating stuff. john frankel. for more cough of our disruptor series, disruptors.cnbc.com. becky lost all of her memory. ♪ physical >> when we come back, we are going to get ready to close out the trading week. we will head down to the new york stock exchange for jim cramer's stocks to watch ahead of the opening bell. there he is. we will be right back. nobody said an inkjet had to be slow. or that printing in color had to cost a fortune. nobody said an all-in-one had to be bulky. or that you had to print from your desk. at least, nobody said it to us. introducing the business smart inkjet all-in-one series

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welcome to the world leader in derivatives. welcome to superderivatives. welcome back. let's get down to the new york stock exchange. jim cramer joins us now. happy friday. there's a song that talks about the sweet release of a friday night. there's something about fridays, aren't there? it's a sweet release of a friday night. >> look, i think fridays -- everybody is exhausted. you get right in. no traffic. i do think it's one of those

days that is funny. you have been talking about how did the market divorce itself from the fiscal cliff yesterday? remember, it's also the friday that's the end of the month. there's been a lot of buying underneath. you never underestimate the process of marking up. >> you're doing those p predictions this year, are you? what's the biggest threat to the economy in 2013? are you doing that? i thought long and hard about it. is it a dirty -- is it another -- the biggest threat if we wipe out 100,000 people or something, that would be a big threat, would it not? >> i did not go dooms day. i said that the shock would be possibly dramatically higher interest rates because if they don't do a good deal for fiscal cliff and keep spending money, it's entirely possible this is going to be our come up -- >> the fed isn't big enough -- i thought i could count on rates below next year.

>> i think demand is good. there will be a bit of inflation. people will be surprised. they ought to go get a mortgage now. they should be buying something now before that part of the economy heats up. housing stays strong. >> not europe. >> not europe. not asia. >> everyone is thinking about fiscal cliff. i have to go with i'm so worried about how many promises we've made in terms of $87 trillion of stuff we're not going to be able to afford and i am afraid we never, ever come to grips with it. >> that's why i think inflation is going to be an issue, joe, for exactly what you just said. kick the can does not last at 3% interest rates. it doesn't last. >> liesman is here. what's your -- he said if the jobless rate stays high is the biggest threat to 2013. why would the economy be bad? >> i'm worried about the long-term effect of joblessness

beginning to change the workforce in this country and create a permanent jobless problem in this country. i think next year is the year we want to see real progress. i'm predicting a 6.9% unemployment rate the end of the year. i say we go down a full percentage point. >> that sounds like nirvana to me. >> it's a lot of unemployed people. we're all relavist now. >> will i see you tomorrow night? >> of course. >> do you remember me at my wedding? let's do that. >> our late friend mark haines was there. it was an event where we had great time. >> we did. let's do it tomorrow night. >> thank you. >> we'll get a designated driver. thanks, jim. see you in a few minutes. >> coming up, more from our guest host. we'll give him the last word when "squawk" returns. >> the clock is ticking for

lawmakers to come up with a compromise deal to avoid the fiscal cliff. who will have the courage to lead us away from the edge? we'll ask guest host david walker on the comeback america initiative when a grand bargain could look like. watch "squawk box" on monday and wise above the partisan politics.

welcome back to "squawk box," everyone. let's get back to our guest host for the last word. you said the last word should be taxes. >> it's confusing to me why they want to raise taxes on one hand this year and take a tax code overhaul next year. you can't change rates twice in one year. i don't understand there's no discussion about it. it's taken 15 years to get agreement we ought to overhaul the tax code so why mess it up by virtue of what we do in 15 minutes to resolve the fiscal cliff. >> people say it takes three or four years to do a decent job. >> we're closer to doing it than we've been in a decade. >> you might as well do it with the rich at 39.6 for a little while. get that back there and do it